Lost opportunity

Last week, Deputy Prime Minister and Agriculture Minister Andrzej Lepper lost his post after demanding hikes in budget spending on healthcare, education, pensions and agriculture. Law and Justice may have saved its draft budget at the expense of its coalition partner, but the budget deficit is already on shaky ground.

Spending in the current budget draft amounts to zł.242.2 billion, against projected revenues of zł.212.2 billion. The budget cap is set at zł.30 billion.

According to the Polish Confederation of Private Employers (PKPP) Lewiatan, the 2007 budget draft is a serious step backwards, as it abandons the reform of public finances. "Poland is wasting a unique chance to reduce spending and change its structure towards a more developmental direction," says Henryka Bochniarz, president of PKPP Lewiatan. She points out that the current economic situation is conducive to such reform, since unemployment is decreasing and real wages are rising substantially. According to differing estimates, Poland's economic growth is 4.5-5.5 percent.

One of the main problems with the budget, in the opinion of PKPP Lewiatan, is the high spending growth rate (8.5 percent), which surpasses the revenue growth rate (eight percent). According to economists, social spending should not be raised, and should actually be lowered. However, compared to this year's budget, social spending in the 2007 budget will be increased by zł.3 billion.

Zyta Gilowska's return to the post of Finance Minister is not likely to change much as this week the budget must be submitted to the Sejm for debate. However, market analysts say it is better to have lost Lepper and kept budget spending in check.